Snap Stock Gains on Accelerating Sales Growth

By Adriaan Brits Friday, April 23, 2021

Snap stock has gained over 5% in early trading today after the tech company, which operates the popular social media app Snapchat, reported stronger-than-expected earnings for its Q1.

Apple iPad screen under a magnifying glass.

Accelerating Sales Growth

Snap stock received a major boost in extended trading yesterday after the tech company said it lost $287 million, which is better than a loss of $306 million a year ago. On an adjusted basis, the Snapchat operator had a break-even quarter, again better than a loss of $0.06 per share expected from Wall Street.

“We began 2021 by achieving our highest year-over-year revenue and daily active user growth rates in over three years during the quarter, and delivering positive Free Cash Flow for the first time in Snap’s history as a public company,” said Evan Spiegel, CEO of the social media business.

“The strength of our business underscores our relentless focus on product innovation and is a testament to our team’s ability to execute well together over the long term.”

Business sales in Q1 came in at $770 million to top the consensus of $743.8 million. Snap stock has also been boosted by the fact that Snapchat recorded a beat on two key metrics measures in the social media business sector.

Global daily active users (DAUs) soared 22% year-over-year (YOY) to 280 million to beat the 274.62 million consensus, according to data provided by FactSet. In Q2, the social media business expects to add 10 million new daily active users globally. Similarly, the average revenue per user (ARPU) was reported at $2.74, which is higher than the $2.72 that Wall Street was calling for.

For the ongoing quarter, Snapchat operator expects its adjusted EBITDA to come in a range between negative $20 million or break even. A better-than-expected guidance comes in on the back of the business sales growth of more than 80%, the company said. In Q1, business revenue soared 66%.

One of the reasons why Snap stock has moved higher in early trading Friday is that the company reported positive free cash flow (FCF) for the first time as a public company. A year ago, Snap had a negative FCF of $5 million, compared to $126 million reported for Q1 this year.

Spiegel said that Snapchat now appears more popular on Android as the user base on this operating platform is now bigger than the one on Apple’s iOS operating system. This represents “a critical milestone that reflects the long-term value of the investment we made to rebuild our Android application,” he said.

Snapchat is preparing for a much-awaited iOS 14 privacy update that will be introduced by Apple soon, which is expected to change how the social media company targets ads to users. The Q2 guidance included these potential impacts, said Spiegel.

Snap stock is up nearly 14% year-to-end (YTD) after it printed the highest ever level earlier in April. The social media business has a market capitalization of almost $88 billion.

Summary

Snap stock soared over 5% in pre-market trading Friday after the social media company behind the Snapchat app topped Q1 expectations for a loss, business revenues, and other key business performance metrics.

About the Author


Headshot for author Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

Related Articles